Since the introduction of cryptocurrency into the world, it has been used for a wide range of purposes in imitation of fiat currencies. Recently, crypto-backed loans have been introduced into the cryptocurrency industry and this may have a huge impact on the industry. Ever since its introduction, some organizations have taken the lead in loans backed by cryptocurrency.
Impact of crypto-based loans on the cryptocurrency industry
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Any new innovation or invention does have an impact on the users. It is safe to say that the introduction of crypto-backed lending will also affect the cryptocurrency investors and users. It is needless to say that this novice innovation will have an impact on the cryptocurrency world. Some potential effects of the loan on the cryptocurrency industry are discussed below:
- It will increase the popularity of the industry
As more organizations roll out loans backed by cryptocurrency, the borrowers will consider it a good alternative to taking fiat loans from banks. Since the loan process is a bit easier than taking a loan from banks or financial institutions, more people will want to take advantage of the opportunity. That will gradually increase the popularity of the industry.
According to Jamie Redman in his article entitled Crypto-to-Cash Lending is Growing Quite Popular These Days, “The popularity of this type of business is growing due to the many benefits loans like these offer such as lending without credit checks, and the ability to obtain fiat based off crypto reserves without paying capital gains.”
- It makes cryptocurrency more appealing
Some individuals and organizations still entertain some reservations against the digital currency. Their fear is borne out of the assumption that it won’t stand the test of time. However, crypto-backed lending has proven beyond doubt that digital currencies have the potential to be used as a replacement for fiat currencies. This will increase the overall appeal of the digital industry.
- Cryptocurrencies may experience a hike in price
When the appreciation for digital coin increases, more investors may want to leverage the increasing popularity of the lending options to buy into the industry. This will increase the values of digital currencies as demands for digital currencies and crypto-backed loans in accordance with the law of demand and supply.
For instance, if the users for digital asset-backed loans double or triple within the next couple of years, the surge in demand will lead to a corresponding rise in digital currencies, especially the major ones like Bitcoin, Ethereum, and what have you.
The adoption of digital currencies for loans backed by cryptocurrency is a welcome development. The digital currency community will actually benefit a lot from this smart move. This will go a long way in creating more awareness for digital currencies and make the blockchain community more attractive while the biased against digital currencies are gradually removed.
There are other trusted platforms among which are unchained Capital and SALT Lending. These organizations have provided crypto-backed loans that run into millions of dollars in worth and this may have a huge impact on the cryptocurrency world.